Financial tips & advice

junior isa

Finally, a bit of good news for dedicated savers came out recently with the announcement from the Bank of England that there had been a further fall in inflation.

This was mostly a result of last year’s VAT rise falling out of the annual inflation-rate figures, although the cost of most household goods, clothes and petrol has gone down.

A Better Return on Savings

As a result, savers can expect to earn more on their savings and those not currently saving are expected to at last see an incentive to start. Families with young children should at last feel encouraged to open up a junior ISA for their children.

Over the last four months, inflation has declined to 3.6% and the Retail Price Index (RPI) has seen a decrease to 3.9%. This means that basic rate tax payers must earn 4.51% on their savings to combat inflation, 40% rate taxpayers 6.01% and higher-rate taxpayers 7.21%.

Thinking about saving for your children’s future may now seem more realistic and opening a Junior ISA is a good way to start. The Junior ISA replaced the Child Trust Fund in November 2011 and any child who was not eligible for the Child Trust Fund can now have a Junior ISA opened up in their name.

Finding an Inflation Beating Savings Account The impact of falling inflation is such that there are currently five fixed-rate bond accounts that can beat the inflation rate for basic-rate taxpayers and 26 fixed-rate Individual Savings Accounts (ISAs).

It will be worth your while checking out which accounts are currently beating inflation and opening one up to start saving. Or if you already have a savings account, then do a quick comparison to see how your savings account stacks up against the rest. If yours is under performing, check your terms and conditions, as you may be able to do a transfer to an inflation-beating savings account.

After the last few years of economic gloom that has been much reported in the media, the lower inflation rates should help ease some of the pressure felt by the majority of households, although most do remain understandably cautious and particularly nervous about job insecurity.

Reports indicate that the average household debt has stabilised and there has been a drop in the number of people relying on credit cards or other unsecured debt. The signs had been there in January, with a somewhat unexpected rise of 0.9% in high-street and online spending.

This is coupled with a documented rise of 4.9% in cash savings in the last quarter of 2011. As well as encouraging saving, the falling rate of inflation should also mean less costly borrowing and even more incentive to spend as the year continues.